Canada: Court Of Appeal Affirms Dismissal Of Negligence Claim For Defective But Non-Dangerous Washing Machines

In Arora v. Whirlpool Canada LP (2013 ONCA 657)the Court of Appeal upheld the denial of certification of claims against Whirlpool on the basis that it is plain and obvious there is no cause of action in negligence for diminution in value of a defective non-dangerous consumer product. The Court stated that the Sale of Goods Act (SGA), Consumer Protection Act, 2002 (CPA),and Business Practices Act (BPA)already provide sufficient remedies against the manufacturer and retailer for the wrongs alleged by the plaintiffs.

The Certification Decision

The plaintiffs alleged that front-loading Whirlpool washing machines suffered from design defects which caused a buildup of soap and debris, leading to the growth of mould and bacteria inside the machines, and leaving a musty odour on clothing. There were no allegations that the machines were dangerous or posed any potential injury to the plaintiffs' health. Whirlpool's express warranty provided that it would pay to repair defective materials and workmanship on its machines.

The plaintiffs claimed damages for breach of express warranty, breach of implied warranty, breach of section 52 of the Competition Act, negligence and waiver of tort. They claimed that Whirlpool negligently designed the washing machines, and negligently failed to warn of design defects and the need to take remedial action. They also alleged that Whirlpool breached its warranty that the machines were fit for their intended purpose, and that the failure to disclose the defects was a misrepresentation contrary to section 52 of the Competition Act. The Court of Appeal characterized the remedies sought by the plaintiffs as damages for overpayment on "shoddy goods that were not worth their purchase price." On the certification motion, Justice Perell held that the statement of claim did not disclose a cause of action. After reviewing the jurisprudence, he found that it was "plain and obvious that for non-dangerous goods, there is no recovery in negligence for pure economic losses", the claim was not covered by the express or implied warranties, and section 52 of the Competition Act did not apply to the alleged omissions. Given that these causes of action failed, there was also no claim in waiver of tort as there was no predicate wrongdoing.

The Appeal

Justice Hoy, writing for the Court of Appeal agreed with the certification judge's conclusions noting that jurisprudentially, the most significant of the plaintiffs' claims was their claim in negligence for pure economic loss.

The Warranty Claims

On appeal, the plaintiffs argued that the interpretation of the warranties should be conducted at trial on a full record. Justice Hoy disagreed, as the plaintiffs' claim for defective design was plainly outside the scope of Whirlpool's express warranty to correct defects in materials or workmanship. Further, the plaintiffs had no cause of action against Whirlpool as manufacturer under section 15 of the SGA, because they purchased their washing machines from a retailer and not Whirlpool. The Court did note that the statutes in Saskatchewan and New Brunswick expressly provide a cause of action as against manufacturers where there is no privity of contract, but all the representative plaintiffs were residents of Ontario.

The Misrepresentation Claim

The plaintiffs did not plead a common express representation; rather they pleaded representation by omission – Whirlpool did not tell them that the washing machines they were buying did not self-clean in the same way as certain other washing machines. Justice Hoy agreed that where there is no common express representation pleaded which could convert an omission into a misrepresentation by implication, and the statute does not contain a duty to disclose, it was plain and obvious that a claim for breach of section 52 of the Competition Act cannot succeed.

The Negligence Claim

Justice Hoy agreed with the certification judge that it was plain and obvious the plaintiffs' claim in negligence for pure economic loss could not succeed, noting that recognizing tort liability on the facts of this case would be a "quantum leap" from existing jurisprudence. The leading case on recovery for pure economic loss is the Supreme Court's decision Winnipeg Condominium Corporation No. 36 v. Bird Construction Co. In that case the Court held that there were compelling policy reasons for imposing tortious liability for the cost of repair of dangerous defects in a building. The Court of Appeal noted that the Supreme Court expressly declined to consider whether a similar duty should be recognized when the defects are not dangerous and there is no risk of personal injury. The Court of Appeal did not resolve this question generally, but addressed the plaintiffs' specific claim which Justice Hoy characterized as the difference in value of the product they thought they were getting and the one they actually received. Justice Hoy held that the plaintiffs' claim had no prospect of success in light of the jurisprudence and the existing statutory framework under the SGA, CPA and BPA:

At its heart, the appellants' claim is that they paid more for their washing machines than they are worth. It is squarely about relative product quality – a matter that, as LaForest J. noted in Winnipeg Condominium, is customarily dealt with by contract and not easily defined by tort. In my view, requiring the courts to analyze a myriad of consumer transactions – some involving small outlays of money for goods that quickly depreciate and become redundant – in tort, without the framework of consumer protection legislation, to determine whether the consumer received value for his or her money, would burden an already taxed court system.

Justice Hoy also noted that this was not a case where the plaintiffs were without a remedy. The SGA and CPA provided statutory remedies against the seller of the machines and the BPA and CPA provided remedies against Whirlpool for unfair practices. The plaintiffs had initially advanced a claim under the CPA but had withdrawn that claim prior to the certification motion. Justice Hoy thus concluded that policy considerations negated recognizing a cause of action in negligence for diminution in value for a defective, non-dangerous consumer product.

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